Why we must attract technology companies to list in London

We have a chance to turn London into a destination for global tech companies to list argues Tudor Aw, European Head of Technology at KPMG

Over the last two years the UK Government has openly wooed the tech investors, outlining Britain’s technology credentials and potential for investors at numerous occasions. Chancellor George Osborne has made no secret out of his belief that a highly successful tech sector will underpin the growth of other industries in Britain.

But although we are already doing a lot in terms of strong tax incentives, R&D tax credits and entrepreneur incentives, if you take a step back, there are a few worrying trends.

Tech companies prefer to list in the US

If we look at the Fortune 100 in the States, it is dominated by firms like Apple, Google and Microsoft and so it is important for Britain to attract these companies.

If you look at the technology companies listed in the UK, you have ARM and Sage in the FTSE 100 but we have lost a lot of companies which have been acquired, like Autonomy and Logica.

We could hope that new blood would come forward and replace them but perhaps more worrying, is the trend of technology companies listing on NASDAQ. There is a perception that they understand technology companies better in the States and will pay premium for your company.

It is not easy to find real evidence around this but perception is reality. If you wander around TechHub in East London, even those who have no experience in the City will say that the US is the place to list.

How do we change people’s minds?

Perhaps one way to attract people back to listing in London is to look at the London listing rules. We could loosen regulations around the percentage of shareholding that needs to be listed or the track record you need to have under your belt.

Of course there is a real balancing act because those rules were put in place to protect investors. We don’t want badly run companies listing. But we could make sure that those coming forward to list are companies of substance with the right structures.

There is a difference between general early stage companies and those in the right sectors. I think it’s important we encourage technology start-ups because of their ability to grow very fast.

London is famous for its creative media sector and financial services. The creative side definitely gets the limelight and the tech companies that are really shouted about are the ones with sexy consumer products.

I think where we could really excel is in the hard-core engineering technology companies, more geared for enterprise. Moshi Monsters gets the headlines and that is great.

But if you look at two of our biggest technology companies, ARM and Imagination Technologies, which deal with what some may consider ‘boring’ intellectual property and semi-conductors, their products, are right at the heart of so many technology products like iPhones and touch screens. So we shouldn’t get carried away with only the flashy companies.

London’s Fin-Tech

Technologies aimed at the financial sector, called Fin Tech, are growing in London. The area doesn’t get a lot of publicity, and might even get a bad rap because of the reputation of banks at the moment. Our financial sector is one of the best in the world and if we have a supporting echo-system of start-ups there will be a natural synergy and so we should support that.

The City of London Corporation and the London Mayor are already supporting Fin Tech with investor events and mentoring over the next couple of months. Those are the kinds of initiatives we want to be promoting.

London as the place to list

Promoting London as a place to float technology companies is hugely important, but we shouldn’t targeted only UK or US companies here. We should be going after the tech companies in Russia, Berlin, and Paris etc. If we can get that reputation for being a hub of Fin Tech, listing in London could become the done thing.

We won’t replicate what we see in Silicon Valley and the NASDAQ overnight but we should be promoting LSE and AIM. We have the perfect time zone for many companies and it is a fallacy that our investors have no risk appetite.

We should concentrate on the start-ups with traditional business models that have a product or software to sell rather than relying on unproven business models.

At the moment we are losing our listed companies and with them, the analysts as they have less and less to follow. It is a vicious circle and we are at a critical point.

We must sort out the attractiveness of listing a tech company in London.